Outerwall (OUTR) Trims FY15 Outlook; Announced Resignation of Redbox President Horak
Outerwall Inc. (Nasdaq: OUTR) provided an update on its financial expectations for the full year 2015. The revised outlook reflects lower Redbox segment revenue than expected for the fourth quarter of 2015 based on preliminary results through the end of November and expectations for December, as well as the expected write-off of certain capitalized assets associated with its SampleIt concept, which the company has decided to discontinue.
For the full year 2015, the company now expects:
- Redbox revenue between $1.750 billion and $1.765 billion, compared with the prior range of $1.790 billion to $1.815 billion;
- Consolidated revenue between $2.165 billion and $2.190 billion, compared with the prior range of $2.205 billion to $2.240 billion;
- Core adjusted EBITDA from continuing operations* between $460 million and $475 million, compared with the prior range of $490 million to $510 million;
- Core diluted EPS from continuing operations* between $7.65 and $8.15 on a fully diluted basis, compared with the prior range of $8.82 to $9.52;
- Free cash flow* between $235 million and $255 million, compared with the prior range of $252 million to $282 million.
*** Note: The Street sees FY15 revenue of $2.2 billion and EPS of $9.35.
* Refer to Appendix A for a discussion of Use of Non-GAAP Financial Measures and Core and Non-Core results.
The expected impact to profitability for the fourth quarter reflects the company's increased promotional spend and additional content purchases to encourage consumers to return to normal rental patterns. Since the content was already purchased, there was less opportunity to offset the lower revenue. Outerwall is maintaining its outlook for its Coinstar and ecoATM segments.
While Redbox has driven improvements in both unique customers and total rentals during the first two months of the fourth quarter relative to the third quarter, the business has not met the company's performance expectations and continues to remain challenged by the historically low box office during the third quarter, which was the worst theatrical box office in Redbox kiosks in four years. The company continues to focus on optimizing Redbox and is committed to taking the necessary actions to build upon its strong brand and foundation and position the business for continued success.
Outerwall expects to provide guidance for the full year 2016 when it reports the company's fourth quarter and full year 2015 results.
Redbox Leadership Transition
Outerwall also announced today that Mark Horak is leaving the company. Erik Prusch, Outerwall's chief executive officer, will serve as interim president of Redbox until the position is filled. The company will initiate a search process to fill the role.
"We appreciate Mark's contributions to the company and remain confident in Redbox's position," said Prusch. "While consumers' rental patterns have not returned to the levels we had expected by this time, Redbox continues to be a compelling, valuable entertainment option as the largest movie transaction service in America. Today, we remain focused on driving increases in both unique customers and rentals and driving improved top-line performance while controlling costs and creating efficiencies."
Discontinuation of SampleIt
Outerwall has also made the decision to discontinue its SampleIt concept. After conducting a thorough review, the company did not expect sufficient returns to justify allocating additional capital to SampleIt. As a result of this decision, Outerwall expects to recognize a one-time non-cash charge for accelerated depreciation in the fourth quarter of 2015 of approximately $4.5 million, which equates to approximately $0.16 of core diluted earnings per share from continuing operations impact. The wind-down process is expected to be substantially complete by the end of January 2016.